1. Buy if you can predict that the price will rise further ie
people will buy shares if they perceive that future prices will
rise further
The use of the discounted cash flow method to calculate the
value of a company's share will set the bench mark in which
the buyers to decide to buy the company's share at the current
price. An analyst announces a higher fair value using the DCF
method could lead to more people to perceive the higher company's
value and buy the company's shares.
2. Sell if you can predict that the price will fall
further ie people will sell the shares if they believe that the
future share prices will fall further
Similarly, an analyst announces a lower fair value using the DCF
method could lead to more people to perceive that the current value
/ price is overvalued and decides to sell the company's shares.
3. Buy if you can predict that prices have reached
bottom ie people wil buy shares if they perceive that the share
prices have reached bottom
4. Sell if you can predict that prices have reached the
top ie people will sell shares if they perceive that the share
prices have reached the top
For points 3 and 4, the fundamental analysis cannot be used
to predict the bottom or the top.
Anything la. You are factually very wrong about true fundamental
analysis already. It's not only about DCF. If you know what you are
doing, you can buy at fair value as well. Or DCF could be great but
FA can still tell you that you should not buy. To rattle off, I
take into account NAV, NTA, P/E, P/B, on top of looking at the DCF,
Net Current Liabilities, ROA, ROC, and FCF. Investment moats,
profit sustainbility, growth potential are all important as well.
In addition, for certain companies, I study the about the
management... and for others, I visit their stores too especially
when they are based in Sg, and observe... I'm only left with going
to the AGM to see the managment's presentation because I simply dun
have the luxury of time.
All I can say is, applying such knowledge halfway can kill, be
it TA or FA.